QQQ: Prediction Of Trajectory From Jan. 2022 To Dec. 2023

A Brief History Of QQQ

The Invesco QQQ Trust, which tracks the Nasdaq 100 index, is the fifth-largest ETF listed in the US. Since its inception in March 1999, QQQ has demonstrated a history of outperformance, consistently beating the S&P 500 index. As opposed to the actual Nasdaq 100 index, QQQ is a marketable security that trades on an exchange. It offers traders a way to invest in the 100 largest non-financial companies listed on the Nasdaq.

When QQQ was first launched, it was just a year away from the arrival of the dot.com turbulence. In less than 10 months, the price was doubled. But then it faced the worst moments of its history. From 2000 to 2002, it witnessed annual plunges of some 30+% each. Towards 2003, QQQ reached its bottom and started its 5-year revival.

How devastating was the dotcom turbulence? From its peak of $94.85 in March 2000, QQQ dived to $17.95 after 30 months of deflation. It amounted to a loss of 81.08% from its peak value. The revival in QQQ began in 2003, but was far from being brilliant. The year 2008 saw the coming of the subprime mortgage crisis, which caused QQQ another enormous setback. QQQ was brought back to $24.40, nearly half its IPO price of $44.28. QQQ was destroyed once again, and only until March 2009 was the floor to be seen.

QQQ then spent another two years climbing back to its IPO price. Thus, from its launch in March 1999 to December 2010, QQQ had gone nowhere than wandering for 12 years only to return to its IPO price by the end of 2010.

Investors were impressed by the rapid growth of QQQ in recent years. Its deplorable history before 2011 had all been forgotten. In fact, QQQ has climbed for 11 years since. Its long-awaited bust, supposed to have been triggered early in 2022, was only a recent phenomenon.

The year 2015 had much to be remembered. It had succeeded in challenging its former peak of $104.39 that took place in 2000. QQQ hadn’t shot off immediately, but lingered at that level for almost a year. When reinforcement was completed, QQQ had gathered enough momentum to switch to high gear. It then started its frenzy journey throughout the course from 2016 to the end of 2021.

Below is a summary of the four distinct phases of the history of QQQ.

Will History Repeat?

In explaining how markets operate, Dr. Jean-Paul Rodrigue put forth the underneath chart to depict the four phases of a business cycle. The market grows by duplicating itself by going over all the phases as time advances.

In Dr. Jean-Paul Rodrigue’s words:

Business cycles are a well-understood concept commonly linked with technological innovations, which often trigger a phase of investment and new opportunities in terms of market and employment. The outcome is an economic expansion, and as the technology matures and markets become saturated, expansion slows down. A phase of recession is then a likely possibility as a correction is required to clear the excess investment or capacity that irremediably occurs in the later stages of an economic cycle.

QQQ probably has a 22-year cycle. Today, few people would deny it has entered the blow-off phase. Without the Fed’s intervention, Nasdaq would have collapsed in March 2020. If history were to repeat itself, it would have to undergo a deflation like that of the dotcom bubble of 2000. Based on market fractal evolution, a possible projection of QQQ after blowup may look like this:

I try to estimate the trend of QQQ by fitting an exponential curve to the whole history of available data. As depicted in the above graph, the trend of QQQ is indicated by the red dotted line. It has the equation Y = EXP[0.008X+3.017], with an R² = 68.7%.

When I use the word “trend,” it means the dynamic mean in the time series. It’s a function of time. Notice that QQQ’s trend shall meet its projection at $200 by November 2022. There is a high probability that this will happen, albeit at a different altitude. Be cautious if you are still holding this asset.

According to the author’s simulation, QQQ can reach the floor somewhere around $105 by June 2023. The market may then slip into another stealth phase for some years until investors’ interests come back.

The author’s prediction is based on the presumption that a dot-com type of meltdown could churn out from January 2022 to December 2023. It would be a very gloomy situation. In any case, investors shouldn’t be optimistic in expecting a true bottom around the $200 level. It ought to be below that.